Mexico Shows U.S. the Money

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WASHINGTON, D.C.: President Clinton said Wednesday the Mexican government will repay the final $3.5 billion of U.S.'s 1995 $20 billion bailout on Thursday -- three years ahead of schedule. The payment results in a tidy profit of $580 million for the federal government. "Some said we should not get involved, that the money would never be repaid, that Mexico should fend for itself," said a triumphant Clinton. "They were wrong." At the time of the loan Mexico was on the brink of fiscal collapse, coming less than 48 hours from defaulting on other bond and loan payments. A default probably would have ended foreign investment in the Mexican economy for years, and because of the North American Free Trade Agreement, would have hard hit sectors of the U.S. economy which export heavily to Mexico. Over the objections of many Republicans, who predicted the U.S. government would never recover a dime, Clinton took a political gamble and used his executive authority in February 1995 to extend $20 billion in loans and loan guarantees. Following Clinton's lead, other nations soon kicked in additional billions. Clinton's political gamble was never much of a financial risk: Mexico's desperate straits allowed U.S. negotiators to dictate terms. The Mexican government was forced to impose strict austerity measures, balance its budget, and put up assets of the state-run Pemex oil monopoly as collateral. The loans, combined with the management of a new group of U.S.-educated technocrats in the government, have turned Mexico's economy around. But the recovery has yet to be felt on the street, notes TIME's Timothy Padgett: "The challenge for this government now is to produce growth that sticks to the economy's ribs, and not just the kind of growth that dazzles Wall Street. Most Mexicans aren't feeling any effects of the recovery."